Central government should intervene earlier and more often with local authorities when it has financial concerns about maintained schools, auditors say.

The recommendations were made as part of a report from the National Audit Office (NAO) which warns of the financial challenges facing secondary schools.

The Department of Education estimated mainstream schools will have to find savings of £3bn by 2019-20 to counteract cumulative cost pressures, such as pay rises and higher employer contributions to national insurance and the teachers' pension scheme.

The department expects the savings to be made through better procurement practices and by using staff more efficiently.

It also reported the number of secondary school pupils will rise by 10.3% by 2020 which will lead to a real-terms reduction in funding per pupil.

The proportion of maintained secondary schools spending more than their income increased from 34% in 2010-11 to 59% in 2014-15, the NAO’s report found.

It also learnt the average size of deficit for those in deficit increased in real-terms from £246,000 to £326,000 during the same period.

For secondary academies, the proportion spending more than their income rose from 39% in 2012/13 to 61% in 2014/15.

The auditors found the Department of Education does not know with certainty why schools are overspending or underspending to build up reserves. It also does not know how long these patterns are sustainable.

The NAO also recommended the Education Funding Agency, which oversees the financial management of schools on the Department’s behalf, should intervene earlier and more often with local authorities when it has financial concerns about maintained schools.

‘Mainstream schools have to make £3bn in efficiency savings by 2019-20 against a background of growing pupil numbers and a real-terms reduction in funding per pupil,’ Amyas Morse, head of the National Audit Office, said.

‘The Department is looking to schools to finance high standards by making savings and operating more efficiently but has not yet completed its work to help schools secure crucial procurement and workforce savings.’

‘Based on our experience in other parts of government, this approach involves significant risks that need to be actively managed. Schools could make the ‘desirable’ efficiencies that the Department judges feasible or could make spending choices that put educational outcomes at risk,’ she continued.

‘The Department, therefore, needs effective oversight arrangements that give early warning of problems, and it needs to be ready to intervene quickly where problems do arise.’